Purchasing and Payment Policy and Procedures

Responsible University Officials: Executive Vice President Vice President of Financial Operations and Treasurer

Responsible Offices: Procurement and Payment Services

Origination Date: December 1, 2008

Purchasing and Payment Policy and Procedures

Policy Statement

Northwestern University (NU) supports sustaining and promoting a procurement environment based on the understanding that departments and schools are in the best position to determine what they need to run their programs. Policies, procedures, and processes are meant to support their need to get products and services in a timely and cost effective manner, while also making sure appropriate business processes are followed.

Procurement and Payment Services (PPS), which is part of Financial Operations, is the single point of contact for all centralized procurement and payment activities. Purchasing and Payment Services is considered the procurement expert at NU, setting the overall strategy regarding how purchases and payments should be made. Procurement and Payment Services consists of Vendor File Management, Purchasing, e-Procurement, Accounts Payable, Procurement Card, e-Payment, and Business Diversity.

Reason for Policy / Purpose

Considerable authority has been delegated to departments and schools to make purchasing decisions. This requires that employees involved at every step of the process take full responsibility for understanding NU's policies and procedures regarding purchasing, payment, and vendor relations. Purchasing decisions are business decisions made on behalf of NU and therefore should be made with the utmost consideration for what is in the best interest of NU. Purchases also need to be made in the most efficient and cost effective manner. Following policy and procedures ensures that appropriate business processes occur when dealing with outside vendors. This policy is meant to provide guidance to end users making purchases on behalf of NU.

Department and school personnel who will be responsible for making purchases are expected to have appropriate security for their role (i.e. requestor, approver, etc.) and attend all associated training classes for those roles. Please visit the Finance, Facilities, and Research Administration (FFRA) website for specific training information.

Who Approved this Policy

Executive Vice President Vice President of Financial Operations and Treasurer

Who Needs to Know this Policy

All employees involved in making purchasing decisions or approving purchases on behalf of their department or school.

Website Address for this Policy

The Purchasing Policy and Procedures document is located on the Purchasing Resource Services website. A list of all links referenced throughout this document are included on page 30 and 31.

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Contacts

If you have any questions regarding Purchasing Policy and Procedures, you may contact Purchasing Resource Services at (847) 491-8120 or purchasing@northwestern.edu.

Definitions

? AP ? Accounts Payable ? ASRSP - Accounting Services for Research and Sponsored Programs ? FFRA - Finance, Facilities, and Research Administration ? FM ? Facilities Management ? iBuyNU ? iBuyNU Marketplace ? ITB ? Invitation to Bid ? NU ? Northwestern University ? OGC ? Office of General Counsel ? P-Card ? Procurement Card ? PO ? Purchase Order ? PPS ? Procurement and Payment Services

Table of Contents

Page #

Policy

A. INTRODUCTION .......................................................................................................................... 1 B. ROLE OF PROCUREMENT AND PAYMENT SERVICES .......................................................... 1 C. AUTHORITY AND RESPONSIBILITY.......................................................................................... 1 D. ETHICS ......................................................................................................................................... 2

? Conflict of Interest (COI)......................................................................................................... 2 E. DETERMINATION OF NEED/SELECTING A VENDOR.............................................................. 2 F. CONDUCTING A BID ................................................................................................................... 4 G. SOLE SOURCE ............................................................................................................................ 5 H. SIGNATURE AUTHORITY ........................................................................................................... 5 I. USE OF NUFINANCIALS ............................................................................................................. 6

o Hold From Further Processing ............................................................................................... 6 J. TAX EXEMPT STATUS ................................................................................................................ 7 K. PURCHASING ITEMS WITH UNIVERSITY NAME OR LOGO ................................................... 8 L. VEHICLE PURCHASES ............................................................................................................... 8 M. INTERNET ORDERS.................................................................................................................... 8 N. ADVANCING PERSONAL FUNDS .............................................................................................. 8 O. NON-PURCHASE ORDER TRANSACTIONS ............................................................................. 9

? Procurement Card .................................................................................................................. 9 ? Online Voucher....................................................................................................................... 9 P. RECORD RETENTION ................................................................................................................ 9 Q. PROPERTY OWNERSHIP AND PROPER DISPOSAL............................................................... 9 R. HOUSE ACCOUNTS, CREDIT CARDS, AND DIRECT BILLING.............................................. 10 S. CONFIDENTIALITY .................................................................................................................... 10 T. POST AUDIT .............................................................................................................................. 10 U. POLICY ENFORCEMENT/CONSEQUENCES .......................................................................... 10

Procedures

AA. AUCTIONS AND PURCHASING OF USED ITEMS .................................................................. 12 BB. BID PROCESS ........................................................................................................................... 12 CC. BUSINESS DIVERSITY PROGRAM .......................................................................................... 13 DD. BUY VERSUS LEASE PROCESS ............................................................................................. 14 EE. CAPITAL EQUIPMENT/ASSET TRACKING .............................................................................. 14 FF. CUSTOMS .................................................................................................................................. 14 GG. ENVIRONMENTAL AWARENESS............................................................................................. 14 HH. iBUYNU MARKETPLACE........................................................................................................... 15

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II. INCORRECT OR DAMAGED SHIPMENTS............................................................................... 15 JJ. INTERNET ORDER PROCESSING........................................................................................... 16 KK. INSTALLMENT PURCHASES.................................................................................................... 16 LL. INVOICING/PAYMENT............................................................................................................... 16 MM. MEMBERSHIP CLUBS............................................................................................................... 18 NN. NON-TRAVEL REIMBURSEMENT ............................................................................................ 18 OO. PREFERRED VENDORS ........................................................................................................... 19 PP. PREPAID AND PARTIAL PAYMENT PURCHASE ORDERS ................................................... 20 QQ. PROCUREMENT RELATED PROGRAMS MANAGED BY PPS AND UNIVERSITY SERVICES ........... 20 RR. RECEIVING ................................................................................................................................ 21 SS. REQUESTING NEW VENDORS................................................................................................ 21 TT. REQUISITIONS .......................................................................................................................... 21

o Catalog Requisition (iBuyNU purchases)............................................................................. 21 o Non-Catalog Requisition ...................................................................................................... 22 UU. SEGREGATION OF DUTIES ..................................................................................................... 22 VV. SHIPPING/FREIGHT TERMS .................................................................................................... 23 WW. SPECIAL REQUISITION TYPES ............................................................................................... 23 1. Blanket Order. ...................................................................................................................... 23 2. Grant Subcontracts .............................................................................................................. 24 3. Receive by Dollar Amount.................................................................................................... 24 XX. SURPLUS PROPERTY EXCHANGE......................................................................................... 24 YY. TAX EXEMPT CREDENTIALS................................................................................................... 24 ZZ. VENDOR CODE OF CONDUCT ................................................................................................ 25

Appendix Index ..................................................................................................................................................... 25 Contact Information .............................................................................................................................. 26 Forms/Instructions ................................................................................................................................ 26 Links ..................................................................................................................................................... 27 Change History ..................................................................................................................................... 27

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Policy (organized primarily in the order in which events may occur)

A. INTRODUCTION

NU's goal for every purchasing transaction is to obtain the best value possible. NU strives to procure most goods and services through the use of contracts that have appropriate terms and conditions to properly protect the department/school, University, and vendor. When bids are required by policy, they are to be conducted on an open and competitive basis and without favoritism. Interested suppliers will receive fair and impartial consideration.

Northwestern has implemented the Uniform Guidance Procurement Standards for purchases on sponsored programs, which will be applied to all sponsored programs, including cost share. This is in accordance with government regulations 2 CFR 200.317-326. The primary goals of these procurement standards are to increase reuse of existing equipment and supplies, increase competition when purchasing equipment and supplies, and to minimize sole sources. University departments/schools will ensure that each transaction is classified or defined as an allowable expenditure on a specific chart string. For sponsored programs, certain purchases may be unallowable.

B. ROLE OF PROCUREMENT AND PAYMENT SERVICES

Procurement and Payment Services (PPS) is the single point of contact for centralized procurement activities. Their role is to help departments/schools make informed, best value purchasing decisions, and to make sure products and services are purchased and paid for in the most streamlined way, as well as assist departments/schools with all other purchasing and payment related issues. The primary responsibilities of PPS are as follows:

Strategically source on behalf of the University by establishing contracts and agreements for use by all departments/schools based on formal, structured, and consistent processes.

? Actively review spend reports (including P-Card) to look for new contracting opportunities ? Conduct formal bid process and/or handle negotiations ? Develop contracts and secure appropriate signatures ? Streamline the ordering and payment process from contracted vendors ? Contract administration:

o Promote contracts to the University community o Enforce requirements of the contract o Resolve disputes o Review and analyze prices and price increase requests o Discuss and document changes Maintain, interpret, and enforce purchasing and payment policy Approve purchases when central approval is required by policy ? PPS reserves the right to review and question any purchasing transaction. Assist with the bid process on behalf of departments/schools, at their request Manage the dispatching of all Purchase Orders to vendors ? Monitor fax server and intervene when necessary ? Manually send POs when necessary Support and maintain the iBuyNU Marketplace ? Manage the process of enabling new vendor catalogs Process changes to Purchase Orders, when requested by departments/schools Work with the Office of General Counsel ? Streamline the contract review process ? Develop templates for use by departments/schools ? Make sure contracts, including terms and conditions, are reviewed and signed

Manage the Business Diversity Program Vendor File Management Accounts Payable Procurement Card e-Payment

C. AUTHORITY AND RESPONSIBILITY

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As stated above, NU maintains a procurement environment that delegates considerable decision making authority to departments/schools. Employees involved in the purchasing process take full responsibility for understanding NU's policies and procedures regarding purchasing and vendor relations. Purchasing decisions are business decisions made on behalf of NU and therefore should be made with the utmost consideration for what is in the best interest of NU.

Segregation of duties and responsibilities in the purchasing process provides proper controls. As the dollar value and complexity of a purchase increases, so does the level of authority and responsibility required to obligate NU for a purchase. (see Paragraph UU)

If a department/school utilizes controlled substances, they are required to have all appropriate licenses from the Drug Enforcement Administration (DEA).

D. ETHICS

Ethical business standards shall govern all procurement transactions. Infractions of University policy are to be reported to PPS, the department chair, the NU Office for Audit and Advisory Services, and an Officer of NU. Disciplinary action for those violating ethical business standards will be taken in accordance with applicable University policy, up to and including the termination of employment.

University personnel shall not solicit or accept a significant gift from a supplier or prospective supplier. A `significant gift' is defined as an item, service, favor, monies, credits, or discounts not available to others which could influence purchasing decisions, and also may include the payment of travel costs for NU personnel to visit a vendor's location (airfare, hotel, etc.). University personnel may accept trivial items as a matter of courtesy, but may not solicit them. Acceptance of social invitations to occasional business meals, entertainment, and hospitality will be subject to prudent judgment as to whether the invitation places or appears to place the recipient under any obligation, the appropriateness of the occasion, frequency, and choice of facilities. Questions about the value of a gift or appropriateness of an invitation should be referred to your supervisor or the COI committee to ensure compliance with NU's conflict of interest policy. For additional information see Standards for Business Conduct.

It is also inappropriate for end users to make purchasing decisions based on marketing strategies by vendors that provide gifts or gift cards which could benefit them personally. Often the pricing offered, as well as future pricing, is much higher than pricing available from Preferred Vendors. If a gift or gift card is received, it is the property of NU.

? Conflict of Interest (COI)

It is the policy of Northwestern that its employees conduct the affairs of the University in accordance with the highest ethical, legal, and moral standards. An employee must not be in a position to make a decision for the University if his or her personal, professional, or economic interests (or those of his or her immediate and extended family member) may be directly influenced or affected by the outcome. A COI attestation will be required when requesting that a new vendor be added to NUFinancials, for purchases of $25,000 or more (unless sponsored dollars are being used, see Paragraph G), and annually through Human Resources. Refer to the NU Conflict of Interest Policy for more information.

E. DETERMINATION OF NEED/SELECTING A VENDOR

When a department/school needs to purchase a product or service, there are numerous considerations that must be taken into account prior to selecting a vendor:

? Preferred Vendors. Departments/schools should first check to see if a Preferred Vendor Contract exists that they could use. Preferred Vendor Contracts are established by PPS for products and services needed by NU departments/schools on a regular basis. Contracts are established based on the results of a formal competitive bid/negotiation process that involves representatives from across campus. Bidders determined to represent the best value to NU become Preferred Vendors (based on price, delivery capabilities, quality, past performance, training, financial stability, ease of ordering, etc.). Departments/schools are strongly

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encouraged to utilize Preferred Vendors because they have been determined to represent the best overall value to NU. (see Paragraph OO)

iBuyNU. iBuyNU is a tool that was implemented to streamline the entire procure-to-pay process and should be used whenever possible. It provides end-users with a web-based ordering experience for many Preferred Vendors that is integrated with NUFinancials. iBuyNU currently includes catalogs representing literally millions of items that may be needed on a dayto-day basis, all of which reflect competitive discounted pricing, often delivered within 1-2 business days at no additional cost, and no sales tax is charged. POs are dispatched electronically several times a day, invoices are received electronically, workflow is streamlined, and vendors are paid electronically. (see Paragraph HH)

? Collaboration Requirements. Departments/schools must work with the following departments for the project types indicated below:

o Facilities Management ? construction and major renovation o University Services Motor Pool - vehicles o NUIT ? technology and communications

? Purchases from Internal Service Units. NU has elected to provide for the purchase of certain commodities and services through internal departments. Departments/schools should consider use of such programs before looking for an outside vendor. Examples are HR Workplace Learning and University Services (including Travel Services, Motor Pool, Laboratory Gas and Dry Ice, Duplicating, Mail services, etc.). Advantages of using internal providers include eliminating POs and checks (costs are direct charged to a chart string), as well as fast turnaround of products and services.

? Freight Terms. F.O.B. Destination is the NU standard delivery requirement, since it provides the most protection to the department/school and NU. It should be negotiated into all purchases whenever possible. F.O.B. Destination means that legal ownership of the item transfers when it reaches the buyer. Therefore, the seller pays all shipping costs and is also responsible for the goods during transit. (see Paragraph VV)

? Insurance Requirements. NU has established minimum contractor liability insurance requirements. Risk Management must review and approve any exceptions to the standard insurance requirements of NU. PPS will coordinate the assessment of insurance coverage when PPS is handling the ITB. Departments/schools with specific questions should contact Risk Management.

? Service Provider Security Assessment. NU contracts with many Information Technology vendors or Service Providers to assist with its information processing needs. In those instances where University data is shared with a Service Provider, or captured by a Service Provider on behalf of NU, NU requires these potential Service Providers to complete a Security Assessment. Departments/schools with specific questions should contact NUIT's Information and System Security/Compliance office.

? PCI Compliance. Contractors (TPSPs ? Third Party Service Providers) are required to abide by the requirements of the Payment Card Industry Data Security Standard (PCI DSS, Version 3.0). PCI DSS applies to all entities involved in payment card processing, including merchants, processors, financial institutions, and service providers, as well as all other entities that store, process, or transmit card holder data and/or sensitive authentication data. Departments/schools with specific questions should contact Treasury Operations.

? Technology/Web Accessibility. NU is committed to purchasing products and solutions that meet the applicable standards of Web Content Accessibility Guidelines (WCAG) 2.0 Level AA. Departments/ schools with specific questions should contact NUIT Consulting and Project Management Office.

? Export Controls. Vendors are responsible for complying with all applicable export control regulations. Any such export-controlled items, equipment, or information MUST be properly

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handled and labeled by the Vendor as part of the Vendor's responsibilities under the law. The burden shall be on the Vendor to prevent such export-controlled information from being improperly disclosed to NU and if necessary, the Vendor shall obtain the appropriate license or approval from the relevant authorities or shall invoke an available exception, exemption, or exclusion before disclosing any export-controlled materials to NU. Departments/schools with specific questions should contact the Office of Export Controls Compliance.

? Business Diversity. Business diversity should be considered in purchasing decisions, when appropriate. This Program is NU's initiative to create opportunities for vendors reflecting economic and cultural diversity to market their products to NU and to encourage University departments/schools to offer opportunities to such vendors. This includes small business enterprises (SBE), minority-owned business enterprises (MBE), woman-owned business enterprises (WBE), and local (Evanston) business enterprises (LBE). (see Paragraph CC)

? Environmental Awareness. Environmental impact should be considered in purchasing decisions, when appropriate. NU encourages departments/schools to consider the use of products and services that impact the environment less than competing products, when it is a best value decision to do so. Things to consider are total cost of ownership, energy efficiency (Energy Star equipment rating), shipping materials, landfill contribution, recycled content, waste prevention, waste reduction, pollution prevention, clean air and water programs, re-use of materials, minimization of scrap material, and any other green factory initiatives, etc. (see Paragraph GG)

? Buy versus Lease. Equipment should almost always be acquired by outright purchase. Circumstances may require the leasing of equipment to satisfy specific needs. The economic benefits of leasing versus buying must be determined and documented before entering into any lease agreement. Third Party leases are especially discouraged. (see Paragraph DD)

F. CONDUCTING A BID

If there is no Preferred Vendor for the product or service needed, bids must be solicited from at least three vendors for purchases of $25,000 or more, unless sponsored dollars are being used (see Paragraph G below). A structured process should be utilized that involves formal definition of requirements, standard Northwestern terms and conditions, description of the process and how the award decision will be made, etc. Award decisions should be made to the vendor representing the best overall value to NU. (see Paragraph BB)

When bids need to be solicited, departments/schools have the following options:

? Department/school can perform a competitive bid.

? Department/school can request that PPS conduct a competitive bid/negotiation on their behalf.

Please note that departments/schools are strongly encouraged to involve PPS in the procurement process for significant purchases or when a strategic relationship needs to be established with a vendor for a particular product or service. PPS will coordinate the inclusion and assessment of all of the factors and considerations identified in Paragraph E above when PPS is handling the bid process). If a department or school would like to request assistance with the ITB process, they should contact PPS at (847) 491-8120 or purchasing@northwestern.edu.

Please note that the total intended obligation (estimated total value of the contract or project) must be considered when determining whether a competitive bid needs to be performed.

G. SPONSORED DOLLARS SPENDING

Northwestern University has implemented the Uniform Guidance Procurement Standards for purchases on sponsored programs, which will be applied to all sponsored programs, including cost share. This is in accordance with government regulations 2 CFR 200.317-326. The primary goals of these procurement standards are to increase reuse of existing equipment and supplies, increase competition when purchasing equipment and supplies, and to minimize sole sources. To assist departments with the transition to the new standards, please note the following:

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? Multiple bids must be solicited by departments and schools for purchases of $10,000 or more, which is the micro-purchase threshold currently set at $10,000 per the Federal FY2017 National Defense Authorization Act (NDAA), whenever possible when sponsored funds are being used, unless the product/service is purchased from a Northwestern Preferred Vendor. The Purchasing Decision Documentation (PDD) must be completed, which will result in the creation of one of the following forms:

o Bid Summary Form o Sole Source Justification Form

The appropriate form and all quotes must be attached to the requisition or payment request in NUFinancials.

? Purchases must be reasonable, allocable, and allowable.

? Bids for purchases of $250,000 or more (currently set per the FY2018 NDAA) using sponsored funds will be formally conducted by PPS.

? Accounting Services for Research and Sponsored Programs (ASRSP) approves transactions of $5,000 or more for sponsored programs. The Charging Sponsored Projects Cost Allowability Guide illustrates the criteria for charging expenses under Uniform Guidance.

? Procurement and Payment Services (PPS) will continue to be the final approver for all requisitions of $25,000 or more.

? A cost transfer for equipment and purchases of $10,000 or more from non-sponsored to sponsored chart strings must also have documentation that multiple bids were received or it is an approved sole source to be eligible for transfer. Documentation will need to be attached.

H. SOLE SOURCE

If there is no ability to solicit multiple bids, departments/schools must demonstrate that the purchase from a particular vendor is sufficiently justified as a sole source. Sole source means that a single vendor is uniquely qualified to meet the department/school's procurement objective. To be considered a sole source and therefore exempt from the bid process, one of the following conditions must be met:

? The actual product or service needed is the only one that will meet the department/school's need/requirement and it can only be purchased from one source (manufacturer or distributor).

? The product or service must match or be compatible with current equipment or services. ? The product needed is specifically required for use in conjunction with a grant or contract. ? The service needed is controlled/mandated by the local utility or government. ? Artistic services. ? An unusual or compelling urgency exists.

If the need meets one of the above criteria, the department/school can either negotiate with the vendor directly or can request that PPS negotiate with the vendor on its behalf. All factors identified in Paragraph E above need to be considered.

I. SIGNATURE AUTHORITY

Upon selection of a vendor, a contract may be necessary. Please note that end users within departments/schools typically do NOT have the authority to sign ANY contracts or agreements with outside parties in the name of NU or one of its departments/schools. PPS will coordinate the contract review and signature process with OGC when PPS is handling the ITB.

? Contracts and agreements that need to be signed by NU MUST be sent to the OGC for review. OGC may also forward contracts and agreements for the purchase of products and services to PPS for review to make sure appropriate policies and procedures were

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